SRINAGAR -- For Dal Lake, an ebb in Kashmir's separatist insurgency and tentative peace moves between India and Pakistan has come none to soon.

Raw sewage, land encroachment and years of neglect have been threatening the survival of a lake where visitors from Mughal emperors to George Harrison once enjoyed the idyllic stillness of its waters surrounded by Himalayan mountains.

But with militant violence at its lowest ever level since the revolt started in 1989, authorities say they can finally focus on saving Dal Lake with a multi-million dollar cleanup that could see the mass removal of some 60,000 people living off its waters.

"It has given us a breathing space," said Mir Naseem, Vice-Chairman of Kashmir's Lakes and Waterways Authority, which is running the conservation plan.

"There are lots of problems that threaten the basic survival of the lake. But we can now take on environmental issues. Before we couldn't even carry out operations."

Thousands of tonnes of sewage spew into the lake, feeding weeds and choking the lake and its aquatic life of oxygen.

The lake's size has been halved in a few decades, to some 13 square km (five square miles), due to farming land encroachment.

A study this year by the state's Comptroller and Auditor General reported that the lake has excessively high levels of toxic metals due to sewage. Pollutants were accumulating in the fish and water which was consumed by humans.

Tests of water samples showed arsenic levels were almost 1,000 times above permissible levels.

"Smell that," said houseboat owner Manzoor Wangnoo as he moved in a shikara, a traditional Kashmiri gondola-shaped boat, along the populated side of the lake near Srinagar, Kashmir's summer capital.

Wangnoo pointed at the algae and plastic bottles, and at pipes spewing raw sewage. A cow stood nearby and women cleaning dishes emptied detergent into the water.

The lake authority says it will spend around $74 mln cleaning up the lake with new sewage treatment plants and drain clearage.

BLAMING THE LAKE DWELLERS

More controversially, it plans to spend nearly $80 million of federal funds to relocate 58 settlements around the lake to a 1,000 acre site a few miles inland. The first 300 families could be moved by the end of the year.

Authorities and many environmentalist blame these families for dumping rubbish, sewage and waste and creating landfills of mud and weed in the waters for farming land and floating gardens.

"They are masters of the lake but they never care for it," said Naseem.

"These settlements do not have proper infrastructure. But we just can't just throw them out. We have to find land nearby. It's very sensitive because there's a social cost."

It could be an uphill task.

Farmers regularly encroach into the lake, often planting trees. Multi-story buildings and small crafts factories have been erected on what officials say are illegal land fills.

Many lake dwellers, some of whom have been there for decades, distrust the relocation proposal -- despite the offer of up to $10,000 compensation for their homes.

"They cannot do this, this is our bread and butter," said Mohammad Sultan, as he worked on his landfill packed with vegetables. Bending down in the field, his feet squelched in mud.

"If they give us money for the land, how long would it last?"

Some environmentalists are also sceptical.

"All I've ever heard from the authorities over the years is that they have a plan, have a plan, have a plan," said Wangnoo.

"But they achieve nothing."

Wangnoo, who is one of those Kashmiris who has returned to the state in recent years as violence eased, has formed an environmental group pressing for the lake's conservation.

He has taken out full page advertisements in Kashmir's press with photos highlighting the state of the lake and has called for it to be declared a UNESCO World Heritage site.

Hundreds of volunteers have already helped pull weeds out of the adjacent Nigeen lake, which is looking its cleanest in years.

Environmentalists and officials are pressing the hundreds of houseboats on the lake, many catering to tourists, to stop dumping waste into the lake.

Many houseboat owners, desperate for tourists, say they are willing to stop but need the infrastructure to do it.

"I remember when guests would take out boats to the middle of the lake and dive in. You could through see the bottom, it was crystal clear," said Gulam Butt, owner of Clermont Houseboats. "Now look at it," Butt said, shaking his head sadly.